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Tags: austerity | Greece | Tsipras | EU | Syriza

Greece Vote Could Lead to Economic Tsunami for Europe, US

John Gizzi By Monday, 29 December 2014 06:31 AM EST Current | Bio | Archive

If, as is widely expected, the Greek parliament fails to elect a president on Monday, then elections will be called that could bring to power the decidedly left-of-center Syriza,  or Party of the Radical Left, as soon as January.

Should a government headed by Syriza’s Alexis Tsipras (who is widely dubbed "the Greek Chavez") pursue its agenda of writing off Greece’s hefty foreign debt and even withdraw from the Euro currency, it could have a devastating impact on economies throughout Europe and very possibly in the U.S.

"I could easily see Greece coming apart by the middle of the year," Desmond Lachman, resident fellow on economics at the American Enterprise Institute, told Newsmax. "If Tsipras and Syriza do come to power and get the opportunity to pursue their agenda, it will set Greece on a collision course with the International Monetary Fund, the European Central Bank, and the European Commission."

This "troika," has provided Greece with 240 billion euros in two installments as a bailout loan since that the Mediterranean nation’s debt was lowered to junk bond status in April 2010.

With the current loan program running out at the end of the month, the Eurozone ministers recently gave Greece a two-month extension on its current repayment plan amid rising worries about Greek finances and the specter of a national election.

Tsipras, 40, and known for never wearing a tie, nearly won national elections in 2012 by denouncing what he calls "the catastrophic policies of austerity."

The leftist leader blames the austerity measures that Greece agreed to in order to secure its loans for its present unemployment rate of 25.9 percent, its 50 percent unemployment rate among youth, and the doubling of its suicides in the last three years.

The "Greek Chavez" has vowed to renegotiate the international loan agreement and austerity measures without taking Greece out of the eurozone. He also calls for greater public spending. Polls now usually show Tsipras’ party now leading the ruling center-right New Democracy Party of Prime Minister Antonis Samaras by 5 to 12 percentage points among likely voters.

The vote for a president of Greece, which Samaras called for, has turned into a referendum on the ruling government. Should lawmakers fail to elect a parliament, Samaras’ government will fall and the election that so many outside of Greece dread will be called for June.

Lachman, who also served as deputy director of the IMF’s Policy Development and Review Department and as chief emerging market economic analyst at Salomon Smith Barney, told us that he had "little doubt that what happens in Greece in 2015 will be contagion to the rest of Europe.

"Europe is roughly 25 percent of the global economy and the U.S. has a lot of financial dealings in Europe. Of course, their economies will be affected by Tsipras coming to power and carrying out the agenda he says he will carry out."

The pending election and Lachman’s grim assessment came less than two weeks after Newsmax received an upbeat assessment from the Greek charged with attracting fresh investment to his fiscally embattled nation: Stephanos Issaias, chief executive officer of Enterprise Greece.

"People were asking in September whether Greece would make it to Christmas," Issaias told us. "Well, we did. And the government has a budget surplus for the first time since 1948."

With that historic surplus, he added, Greece is the top reformer in the latest World Bank Doing Business report.

Issaias pointed out that, aside from the disappointing figures on unemployment and particularly youth unemployment, "the rest of the fundamentals look pretty good. We have made structural changes and the government pensions have been cut 21 percent. The highest pensions have been cut 40 percent and the minimum retirement age raised to 67 years [from 55 years]."

The Enterprise Greece CEO told us that "there is much to be done" and "international investors are engaging us now."

As for the scenario "Prime Minister Tsipras" withdrawing Greece from the Euro currency, sources close to the Central Bank of Greece privately insist that there are quite a few steps before the nation is faced with a possible exit from the Euro. Issaias cited polls showing 90 percent of Greeks support the Euro.

Economist Lachman is not so sure and feels events and a leftist government could lead to Greece getting out or being forced out of the Euro.

About the most sure point an outside observer could make is that "the main event" begins Monday with the vote for president in Athens.

John Gizzi is chief political columnist and White House correspondent for Newsmax.

© 2023 Newsmax. All rights reserved.

If, as is widely expected, the Greek parliament fails to elect a president on Monday, then elections will be called that could bring to power the decidedly left-of-center Syriza party as soon as January.
austerity, Greece, Tsipras, EU, Syriza
Monday, 29 December 2014 06:31 AM
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